History of the economic and monetary Union European

A economic Union and monetarist between the countries of Europe, under consideration since the 19th century, was installation gradually starting from the end of the 20th century, within the European Union : the Euro area and the Mechanism of European foreign exchange rate.

Antecedents of monetary union in Europe

In 1865, a first monetary union is signed on the initiative of Napoleon III, between the France, the Belgium, the Italy, and the Suisse. The principle of this Latin Monetary Union is simple: each currency preserves its name but each one is defined according to the same parity out of gold and out of money, they have all then the same value. They can then freely circulate from one country to another and it is thus for example possible to use Swiss francs in Paris. This first monetary union does not survive the Inflation of after First World War and is formally dissolved in 1926.

The Belgo-Luxembourg economic Union of 1922 between Belgium and Luxembourg which imposes the parity between the Belgian Franc and the Franc Luxembourg is another example.

Genesis within the European Union

Creation of the European currency snake

European Monetary System

Single act

In February 1986 is adopted the European Single act, which devotes the principle of free movement of the goods, services, men and capital (four freedoms).

Definition of the economic and monetary Union

The idea of a monetary union within the European Union germinated progressivement.
In June 1988, the European Council confirmed the objective of the progressive realization of the economic Union and monetarist, and charged a committee placed under the presidency with Jacques Delors, president of the European commission, to study the concrete stages having to lead to this union.

In April 1989, this committee publishes the “Delors Report” (or Plan Delors), which poses the objective of the economic and monetary union characterized by the final fixity of the Foreign exchange rate then the creation of a single currency. He proposed three successive stages to carry out the economic and monetary Union.

This proposal leads on February 7th, 1992 to the signature of the Traité of Maastricht creating the European Union and specifying the conditions of the future passage with the single currency. In order to allow a certain harmony necessary to the monetary union, Europeans decide Critères of convergence conditioning for each Member State the possibility of integrating the monetary union:

the Rate of inflation should not exceed of more than 1,5% that of the three Member States having more the low levels of inflation;
the Budget deficit must be lower than 3% of GDP;
a public Debt lower than 60% of the GDP;
real interest rates in the long run should not exceed of 2% that of the three Member States having weakest;
not of monetary devaluation in the two years preceding integration with the monetary union.

Installation of the economic and monetary Union

First phase of the UEM

Being based on the Delors Report/ratio, the European Council decided, in June 1989, that the first phase of the economic and monetary Union would begin on July 1st 1990 - this date having to mark, in theory, the abolition of all the restrictions on the movements of capital between the Member States . The Committee of the governors of the central banks of the Member States of the European Economic community, which played an increasingly important part in the monetary co-operation since its creation in May 1964, saw itself entrusting new responsibilities. Defined in a Council Decision of March 12th, 1990, these missions in particular consisted in holding consultations on the monetary policies of the Member States and promoting the coordination of those in order to carry out the price stability. Taking into account little serviceable time and complexity tasks, it is the Committee of the governors which engaged the preliminary works for the third phase of the economic and monetary Union (UEM). The first stage was devoted to the census of the priority files, the setting-up of a work program before the end of 1993 and to the definition of the mandates of the sub-committees and the work groups created for this purpose.

To carry out the second and third phases, it was necessary to modify the treaty establishing the European Community (the “the Treaty of Rome”) in order to set up the necessary institutional structure. For this purpose, an intergovernmental conference on the UEM was convened. It was held in 1991, at the same time as the intergovernmental conference on the political union. The negotiations led to the Traité on the European Union which was approved in December 1991 and signed with Maastricht on February 7th, 1992. However, because of the slowness of the process of ratification, the Treaty (which modified the treaty establishing the European Economic community - which is called from now on treated establishing the European Community - and to which were annexed the protocol on the statutes of the European System of central banks and the European Central bank and the protocol on the statutes of the European monetary Institute) came into effect only on November 1st 1993.

Second phase of the UEM

January 1st, 1993, the opening of the single European market inaugurates the second phase of the economic and monetary Union.

The installation of the European monetary Institute (IME), on January 1st, 1994, marked the beginning of the second phase of the UEM. On this date, the Committee of the governors was dissolved. The temporary existence of the IME reflected the level of integration in the monetary field within the Community. The IME did not assume the responsibility for the control of the monetary policy in the European Union - which remained the prerogative of the national authorities - and it was not entitled to carry out interventions of exchange.

The two main missions of the IME consisted with:

to strengthen the co-operation between the national central banks and the coordination of the monetary policies; and with
to ensure the preparation necessary to the introduction of the European System of central banks (SEBC), for the control of the single monetary policy and the creation of a single currency, at the time of the third phase.

For this purpose, the IME was the authority where took place the information and consultations and exchanges of views on the policies to be implemented. Moreover, it specified the regulation framework, organisational and logistic whose SEBC had need to achieve its missions at the time of the third phase. (Overall picture of the preliminary works undertaken by the IME).

In December 1995, the European Council decided that the name of the monetary Unit European in front of being introduced at the beginning of the third phase would be “euro”, and confirmed that the third phase of the UEM would begin on January 1st 1999. A Calendrier of the passage to the euro was announced in advance. This scenario was primarily founded on the detailed proposals formulated by the IME. In parallel, the IME undertook the preliminary works concerning the monetary relations and of exchange between the euro area and the other countries of the EU. In December 1996, the IME addressed to the European Council a report/ratio which was the base of a resolution of the European Council on the principles and the main features of the new mechanism of Foreign exchange rate (MCE II), which was adopted in June 1997.

In December 1996, the IME also submitted to the European Council, then with the public, the series of models of the tickets in euros having to be put in circulation on January 1st, 2002, that the Council of the IME had selected.

In order to supplement and to specify the provisions of the Treaty relating to the UEM, the European Council adopted, in June 1997, the Stability pact and of growth - consisted two Council Regulations aiming at ensuring the budgetary discipline in the context of the UEM. In May 1998, the provisions of the Pact were supplemented by a Declaration of the Council which reinforced engagements of the Member States.

The May 2nd 1998, the Council of the European Union - joined together on the level of the Heads of State or government - decided unanimously that eleven Member States (Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, Netherlands, Austria, Portugal and Finland) filled the requirements for the adoption of the single currency, on January 1st, 1999. These countries thus had to take part in the third phase of the UEM. Moreover, the Heads of State or government managed an agreement on the names of the personalities having to be named, on recommendation of the Council, members of the directory of the European Central bank (BCE).

In parallel, the Ministers for Finance of the Member States adopting the single currency decided, by mutual agreement with the governors of the national central banks of the Member States concerned, the European commission and the IME, that the bilateral course-pivots of the currencies of the participating Member States into force within the MCE would be used to determine the irrevocable convertion rates of the euro.

May 25th, 1998, the governments of the eleven participating Member States named the president, the vice-president and the four other members of the directory of the ECB. Their nominations, which took effect starting from June 1st, 1998, marked the installation of the ECB. The ECB and the national central banks of the participating Member States constitute Eurosystème, which formulates and lays down the single monetary policy during the third phase of the UEM.

The introduction of the ECB, on June 1st, 1998, marked the end of the mission of the IME. In accordance with article 123 (ex-article 109 L) of the treaty establishing the European Community, the IME was liquidated as of the creation of the ECB. The whole of the preliminary works entrusted to the IME were concluded within the deadlines. During the second half-year of 1998, the ECB could test, last once, the systems and the procedures.

Third phase of the UEM

January 1st, 1999, the third and last phase of the UEM is coming into effect with the irrevocable fixing of foreign exchange rates of the currencies of the eleven Member States taking part as of the beginning with the monetary union and the implementation of a single monetary policy under the responsibility of the ECB.

The Euro is introduced in 1999 into the Euro area (for the financial markets), then in 2002 like fiduciary Monnaie.

The Greece entered the third phase of the UEM on January 1st, 2001 - Council Decision of the EU of June 19th, 2000 stipulating that it filled the criteria of convergence; the Slovenia is also member of the euro area since January 1st, 2007.

Notes and references of the article

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